REGIONAL ECONOMIC OUTLOOK
Regional Economic Outlook:Asia and Pacific
April 2007
The recent economic and financial developments and trends in Asia and the Pacific are examined in this latest REO, including issues related to Asia’s trade performance, notably in the high-tech sector, and the February-March bout of turbulence in the region’s financial markets. The near-term outlook, key risks, and their related policy challenges are analyzed throughout, as well as in special chapters that look more closely at the evolving nature of capital inflows, housing market developments, and the impact of commodity price booms on lower-income economies.
Contents
| Definitions | |
| Executive Summary | |
| I. | Overview |
| Recent Developments and the Outlook | |
| Recent Financial Market Developments | |
| Macroeconomic Policy Issues | |
| II. | The Evolving Nature of Capital Flows in Emerging Asia |
| How Has The Nature of Capital Flows Changed? | |
| What Risks and Challenges Do Recent Capital Flows Bring? | |
| Policy Challenges | |
| III. | Housing Prices in Asia: Cause for Concern? |
| The Facts: Are Prices Rising "Too Fast"? | |
| The Booms | |
| Housing Finance and Macro-Financial Risks | |
| Policy Options | |
| Conclusions | |
| IV. | How Should Low-Income Resource-Rich Countries in Asia Respond to Recent Commodity Price Booms? |
| Terms-of-Trade Developments and Their Macroeconomic Impact | |
| Policy Issues | |
| Institutional Framework for Resource Revenue Management | |
| Making Resource Abundance a Blessing | |
| References | |
| Boxes | |
| 1.1. | Asia's Electronics Sector: Looking Back and Ahead |
| 1.2. | Assembly Platforms in Asia: Is China's Role Changing? |
| 1.3. | Vietnam's WTO Accession: What Does It Imply for Vietnam and the Rest of the Region? |
| 1.4. | Carry Trades: Getting Carried Away? |
| 1.5. | Islamic Finance in Malaysia |
| 2.1. | Measuring Capital Flows |
| 2.2. | Banking and Derivatives Flows: Hedging, Carry Trades, and Other Investments |
| 2.3. | Emerging Asia's Experiences in Liberalizing Outflows |
| 4.1. | Managing Oil Revenues in Timor-Leste |
| Tables | |
| 1.1. | Asia: Real GDP Growth |
| 1.2. | Asia: Real Exports Growth |
| 1.3. | Asia: Investment Growth |
| 1.4. | Asia: Private Consumption Growth |
| 1.5. | Asia: Current Account Balances |
| 1.6. | Asia: Official Reserves |
| 1.7. | Asia: Selected Fiscal Indicators |
| 2.1. | Price-Earning Ratio |
| 2.2. | Volatilities of Capital Flows in Asia-Pacific Countries |
| 2.3. | Balance of Payments and Reserve Accumulation in Emerging Asia (in billions of U.S. dollars) |
| 2.4. | Balance of Payments and Reserve Accumulation in Emerging Asia (in percent of GDP) |
| 2.5. | Balance of Payments and Reserve Accumulation in Emerging Asia |
| 3.1. | Summary Table on Housing Finance |
| 4.1. | Indicators for Spending Consideration |
| 4.2. | Country Sample and Size of the Resource Sector |
| 4.3. | Summary Institutional Frameworks for Resource Management |
| Figures | |
| 1.1. | NIEs: Contributions to GDP Growth |
| 1.2. | ASEAN-5: Contributions to GDP Growth |
| 1.3. | China and India: Exports of Goods |
| 1.4. | Emerging Asia: Exports of Goods |
| 1.5. | Emerging Asia: Consumer Confidence |
| 1.6. | Emerging Asia: Consumer Prices |
| 1.7. | Emerging Asia: Producer Prices |
| 1.8. | Emerging Asia: Growth in Real Wages |
| 1.9. | Emerging Asia: Food CPI |
| 1.10. | China: Twelve-Month Trade Surplus |
| 1.11. | Emerging Asia: Equity Inflows |
| 1.12. | Emerging Asia: Equity Performance |
| 1.13. | Emerging Asia: Exchange Market Pressure Index |
| 1.14. | Net Private Capital Flows to Emerging Asia |
| 1.15. | Emerging Asia: Net FDI Flows |
| 1.16. | Cumulative Increases in Policy Rates |
| 1.17. | Emerging Asia: Real Policy Rates |
| 1.18. | Asia: Private Sector Credit Growth |
| 1.19. | Change in Fiscal Revenue, 2002 and 2006 |
| 2.1. | Net Private Capital Flows into Emerging Market and Developing Countries |
| 2.2. | Emerging Asia: Gross Capital Inflows |
| 2.3. | International Banks' Claims on and Liabilities to Asia |
| 2.4. | Geographic Breakdown of Capital Inflows 2005–2006 |
| 2.5. | Emerging Asia: Gross Capital Outflows |
| 2.6. | Geographic Breakdown of Capital Outflows 2005–2006 |
| 2.7. | Net Capital Inflows |
| 2.8. | Emerging Asia: Net Portfolio Investments |
| 2.9. | Emerging Asia: Exchange Market Pressure Index |
| 2.10. | Balance of Payments and Reserve Accumulation |
| 2.11. | Emerging Asia: Pre-crisis Vs. Post-Crisis |
| 2.12. | Equity Investment Inflows into Asia and Pacific Economies |
| 2.13. | Selected Asia: Standard Deviation of Quarterly Changes in Portfolio and Other Investment Inflows |
| 2.14. | "Surges" and Exchange Market Pressure Index (EMPI) |
| 2.15. | Emerging Asia: Capital Flows Volatilities |
| 3.1. | Real House Prices (Annual percentage change) |
| 3.2. | House Price-Rent Ratio |
| 3.3. | Real House Prices and Real Stocks 1999–2006 |
| 3.4. | Real House Prices and Real Income 1999–2006 |
| 3.5. | Completed Housing Unites 2000–2006 |
| 3.6. | Local Real House Prices 2002–2006 |
| 3.7. | Real House Prices (March 1999=100) |
| 3.8. | Real House Prices (March 1990=100) |
| 3.9. | Localized Price-to-Income Ratio |
| 3.10. | Housing Loans in Asia |
| 3.11. | Nonperforming Mortgage Loans |
| 3.12. | Household Debt and Mortgage Growth 2002–2006 |
| 4.1. | Commodity Prices |
| 4.2. | Asia: Terms of Trade of Goods and Services |
| 4.3. | Terms of Trade Gains by Country |
| 4.4. | Commodity Prices on Futures Markets |
| 4.5. | Low-Income Countries: Real GDP Growth |
| 4.6. | CPI Inflation |
| 4.7. | Real Effective Exchange Rates |
| 4.8. | Resource Exports Windfall |
| 4.9. | Current Account Balance |
| 4.10. | Resource Revenue Spending From 2002 to 2006 |
| 4.11. | Change in Nonresource Fiscal Deficit |
| 4.12. | Low-Income Asia: Consumer Price Inflation |
| 4.13. | Real Effective Exchange Rates |
| 4.14. | External Public Debt |
| 4.15. | Ratio of Foreign Reserves to Imports |
| 4.16. | Indonesia: Exports Composition |
| 4.17. | Malaysia: Exports Composition |